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Johnson & Johnson to Buy Irvine Firm

Merger: Chairman of breast cancer detection devices firm Biopsys Medical calls the $310-million deal a 'home run.'

May 23, 1997|BARBARA MARSH | TIMES STAFF WRITER

IRVINE — Corporate health-care giant Johnson & Johnson, seizing a chance to enter the growing market for breast cancer detection devices, said Thursday it agreed to buy Irvine-based Biopsys Medical Inc. for a tidy $310 million in stock.

Johnson & Johnson would pay $27.55 per share in stock for Biopsys shares, adding a device for detection of breast cancer to the New Jersey company's already-extensive line of minimally invasive surgery products.

But for early investors in Biopsys, which was started only four years ago, the deal is a rare dream come true.

"This is a home run in our business," said Biopsys Chairman David Chonette, a venture capitalist. Chonette is general partner of Brentwood Venture Capital, an Irvine-based firm that invested roughly $2 a share to acquire a 1.3-million-share stake in Biopsys before the company went public last year at $15 a share. Brentwood still holds more than half of that stake, he said.

Johnson & Johnson would pay about 7% more for Biopsys than the stock's Wednesday closing price of $25.75 a share. Biopsys reached a high of $34.25 in March.

Biopsys stock rose 93.8 cents a share to $26.69 in Nasdaq trading Thursday. Johnson & Johnson closed at $59.50 a share, up 12.5 cents, on the New York Stock Exchange.

Founded in 1993, Biopsys racked up millions in losses before posting its first profit in the three months ended Dec. 30. It lost $3.5 million, or 43 cents a share, on sales of roughly the same amount for the year ended Sept. 30.

Analysts said Johnson & Johnson historically has snapped up fledgling development-stage companies with the potential of growing into businesses that generate hefty annual sales.

Biopsys' key product is its Mammotome device, which has been approved by federal regulators for sampling breast tissue for diagnosis. The company says the device eliminates the need for a large surgical incision, is less damaging to the patient and can be done, on an outpatient basis, in a doctor's office using only a local anesthetic.

If a mass is detected in the mammogram, the doctor then usually has a biopsy performed to see if it is cancerous. Analysts say market demand for such minimally invasive procedures is growing rapidly.

In addition, they said, the purchase of Biopsys will give Johnson & Johnson an entry in the breast cancer detection market, which is already served by its competitor, U.S. Surgical Corp.

In February, the U.S. Food and Drug Administration warned Biopsys that it hadn't received approval to market the device for treatment of breast cancer and also criticized it for promoting the device as an instrument to remove breast cancer. At the time, the company said it had approval for marketing the device but regulators had changed the rules and required special clearance for its use in breast cancer biopsy.

Johnson & Johnson thoroughly studied Biopsys' past regulatory troubles and concluded that they have been resolved, said Robert V. Andrews, a Johnson & Johnson spokesman. He noted that last month Biopsys received regulatory approval to sell its device.

New Brunswick, N.J.-based Johnson & Johnson, a world leader in health-care products, sells drugs, medical products and such consumer items as Band-Aids and Neutrogena soap.

Boards of both companies have approved the transaction, and Johnson & Johnson said shareholders who own about 3.2 million shares of Biopsys--or a third of those outstanding--have agreed to vote for the acquisition. The deal is still subject to approval by all Biopsys shareholders, however.

The deal is expected to be completed by early September, according to the Johnson & Johnson spokesman.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Biopsys Bought

Irvine-based Biopsys Medical Inc. will be acquired by health-care giant Johnson & Johnson for $310 million in stock. Biopsys went public last year and saw its stock soar 26% on the first day of trading. It reached its $34.25 high in February and subsequently retreated to the $20-$27 range. The details:

Biopsys Medical at a Glance

Headquarters: Irvine

President/CEO: Steven L. Gex

Products: Breast cancer diagnostic systems

Employees: 77

Went public: May 1996

Exchange: Nasdaq

1996 sales: $3.5 million

1996 net loss: $3.5 million

Purchase price: $310 million in stock

****

Stock Trend

Closing price on first day of trading, monthly closing prices and Thursday's close:

1996

May 1: $18.89 First day of trading

May 31: $25.00

June 28: $20.00

July 31: $13.00

Aug. 30: $14.25

Sept. 30: $14.75

Oct. 31: $17.13

Nov. 29: $23.75

Dec. 31: $21.75

*

1997

Jan. 31: $26.75

Feb. 28: $31.50

March 31: $24.75

April 30: $20.50

Thursday's close: $26.69

Source: Bloomberg News, Biopsys Medical Inc.

Researched by JANICE L. JONES / Los Angeles Times

Breast Cancer Screening Guidelines

Cancer organizations and medical groups recommend the following for early detection of breast cancer:

* Women 20 to 40 years old: Annual physical exam; no guidelines on mammograms, but many physicians order a baseline mammogram for all patients at age 35 (earlier for those in high-risk groups)

* 40 and older: Annual mammogram and physical

Source: Times reports

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